Farfetch, the UK-based online luxury fashion marketplace, has filed for an IPO and plans to list on the New York Stock Exchange under the ticker “FTCH.”Proceeds from the initial public offering will be used for working capital, including possible acquisitions, the company said. The company is seeking a valuation as high as $5 billion, according to CNBC.
The decision to go public comes at a time when shoppers are becoming more comfortable with the idea of buying luxury goods online. Online sales made up 9% of global luxury revenue in 2017 and are forecast to reach 25% of all sales by 2025, according to Bain and Co. Yet Farfetch operates on a different model, selling products from nearly 900 brands and boutiques worldwide. The company prides itself on curation and inspiration, allowing shoppers to navigate by brand, item or its stylized edits.
Farfetch has taken steps in recent years to increase its value through partnerships, such as with Condé Nast. The marketplace integrated the magazine publisher’s content with the Farfetch shopping platform, and the Style.com web site also now redirects to Farfetch. In September 2015, Farfetch also launched Black and White, an infrastructure platform that luxury brands can use to develop their own e-Commerce business.
Like its chief competitor, Yoox Net-A-Porter, Farfetch has made itself a valuable asset by operating in a territory that Amazon has not been able to move into. Many luxury goods brands are still hesitant to sell on Amazon since such a move could be perceived as a hit to their brand, but neither Farfetch nor Yoox Net-A-Porter carry this baggage. Earlier this year, Swiss luxury group Richemont, owner of high-end brands such as Cartier and Montblanc, set the bar for luxury fashion marketplaces after completing a takeover of Yoox Net-A-Porter shares. The offer valued the group at $6.20 billion, indicating that Farfetch could garner a similar valuation.
In fiscal 2017, Farfetch generated revenue of $385 million, a 59% jump over the previous year. Additionally, the company sold $910 million in gross merchandise value (GMV) in 2017. However, losses deepened to $68 million in the first half of this year, from $29 million in the same period of 2017, as investments and costs increased. The company has yet to turn a profit.
Existing shareholders include China’s JD.com, which invested $397 million in 2017, expanding Farfetch’s foothold in the world’s biggest market for luxury consumers. JD.com has agreed to buy more shares to maintain its stake after the listing, Farfetch said, without disclosing the size of the JD.com holding.